Commentary: Right-to-Work Will Keep Michigan Competitive

(Editor's Note: This article first appeared in the Detroit Free Press on Jan. 22, 2012.)

Indiana may soon become America's 23rd right-to-work state:
Legislation is under consideration in both chambers of the Indiana
Legislature, and Gov. Mitch Daniels said he will sign such a bill.
Michigan may need to adopt such a law to better compete for jobs and
talent.

Perhaps the best information on the influence of
right-to-work laws comes from a 1998 study authored by economist Thomas
Holmes of the Federal Reserve Bank of Minneapolis. Holmes examined
manufacturing employment in border counties of neighboring states where
one state had right-to-work protections and the other did not.

He
found manufacturing employment as a percentage of county population
increased by a third in the counties within the right-to-work states
compared with those in the non-right-to-work states.

This study
has two vital implications. First, it shows the impact that state-level
public policies can have on economic development. Second, it neutralizes
claims by right-to-work critics that some other impossible-to-measure
variable -- such as attitudes toward unions -- is unduly influencing
economic performance in right-to-work states.

This is not to say
that passage of a right-to-work law in Indiana will result in an
increase in border-county manufacturing employment by a third. As Holmes
points out, right-to-work states are typically pro-business to begin
with. Indiana's adoption of a right-to-work law would formalize its
status while implicitly magnifying Michigan's reputation for being more
hostile to business.

A
2012 study from Michael Hicks, an adjunct scholar with the Mackinac
Center writing for Ball State University's Center for Business and
Economic Research, found that from 1929 through 2005, the presence of a
right-to-work law did not play a role in state industrial composition or
income from manufacturing.

Hicks did find a significant influence
of right-to-work laws on the total growth of incomes for manufacturing
workers. He also found that during the decade following passage of a
right-to-work law, the yearly changes in the share of manufacturing
increased in the 10 most recent states to adopt such a measure.
According to Hicks, seven of the 10 saw manufacturing incomes increase
-- after adjusting for inflation -- between 15% and 40%.

Economist
Richard Vedder's 2010 study "Right-to-Work Laws: Liberty, Prosperity,
and Quality of Life" in the Cato Journal addresses these laws from a
migration angle. For many researchers, migration reflects an investment
in oneself, and as such helps aggregate "quality of life" issues into a
single variable. Vedder notes that 40% of Americans lived in
right-to-work states in 2007, up from 28.5% in 1970. Moreover, Census
data indicate that from April 2000 to July 2008, more than 4.7 million
people moved from non-right-to-work states to right-to-work states.

These
changes are probably more than just coincidence. Vedder's conclusion
was that "without exception ... a statistically significant positive
relationship was observed between the presence of RTW laws and net
migration."

Most seem to move because greater opportunities are
provided in states with more labor market freedom. His research
underscores the argument that people "vote with their feet to move to
freer labor market environments."

This has important implications
for Michigan, because Indiana is a border state. Moving there for work
is less costly financially and psychologically than, say, Texas.
Economic theory and evidence show that lowering the price of something
encourages more of it, so a right-to-work law in Indiana could mean
greater population loss here.

Michigan should consider its own
right-to-work law. Neglecting to do so allows Indiana to cement its
reputation as a friendlier climate in which to live and do business, to
the detriment of the Great Lakes State.

Delivered right to your inbox

Subscribe to our weekly email:

Michigan Capitol Confidential is a nonprofit news service published by the Mackinac Center and funded entirely through voluntary support. Please consider a gift today to help shine a light on government through independent journalism.